Consumer prices across Canada decelerated slightly in June, but price pressures still remained elevated at the hottest levels in almost a decade.
According to Statistics Canada, which recently updated basket weights to better reflect pandemic-related consumption preferences, the consumer price index rose 0.3% in June, down from a 0.5% increase in the month prior. Compared to year-ago levels, prices were 3.1% higher in June, but down 0.5% from May’s annual inflation rate of 3.6%. Core CPI, which excludes volatility associated with gasoline prices, jumped 2.2% year-over-year.
The latest figures were slightly below forecasts, as economists polled by Bloomberg projected an inflation rate of 3.2% in June. Indeed, the reduced pace in price increases certainly adds fuel to the Bank of Canada’s expectations that price pressures are merely transitory. However, policy makers are still calling for inflation to hit an average of 3.9% in the third quarter — a level not seen since the 2000s.
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The majority of the inflation increase was the result of higher shelter costs, which were up 4.4% year-over-year. The increase was largely driven by the ongoing rise in the homeowners’ replacement cost index, which jumped 12.9% from June 2020 levels. Similarly, the owned accommodation expenses index, which accounts for legal fees associated with real estate transactions, was up 12% year-over-year. On the other hand, the mortgage interest cost index plummeted 8.6% from year-ago levels, marking the sharpest decline on record.
Transportation costs were also higher, rising 5.6% in June. Otherwise, price increases rose at a reduced pace across four of the eight major components. Despite this, prices for a number of consumer goods, such as vehicles and household appliances continue to remain elevated due to ongoing global supply chain disruptions. The central bank’s governor, Tiff Macklem, insists that the bottlenecks will ease over the coming months, but given strong demand, inflation could still become more persistent and broad-based.
Information for this briefing was found via Statistics Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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